Corporate cannabis targets bleeding Mexico


There is a discomforting sense that Mexico is perpetually on the eve of cannabis legalization, as the country’s Congress wins a six-month extension from the Supreme Court to pass a law freeing the herb. But foreign capital is already eyeing Mexico’s emergent legal cannabis sector—even amid a terrifying escalation in the bloody cartel wars.

Mexico is poised to become the third country in the world to legalize cannabis, after Uruguay and Canada—and, with a population of nearly 130 million, it will represent the biggest market of the three by far. It also has an ideal climate for cultivation—and a centuries-long tradition of it. Inevitably, international investors are wating eagerly for legalization to finally take effect.

It’s a grim, irony, however, that even amid preparations for legalization, the criminal narco-economy continues to spawn nightmarish violence—with recent bloody episodes starting to look like an actual war, the security forces out-gunned by the cartels. Crafting a legalization model that can effectively tackle this reality will be a challenge.

Congress gets a six-month extension
Last October, the same month that legalization took effect in Canada, Mexico’s Supreme Court issued a binding decision that cannabis prohibition is unconstitutional on individual liberties grounds, and ordered the country’s Congress to amend the law. The ruling imposed a 90-day deadline for Congress to act. But it passed without action. This August the Supreme Court reset the clock, impsing a new 90-day deadline—which was, symbolically, to run out on Oct. 31, one-year anniversary of the high court’s historic decision. Mexican lawmakers in September at last introduced a legalization bill.

But they deadlocked on the details, and just days ahead of the Oct. 31 deadline, the Senate appealed to the Supreme Court to reset the clock again. Julio Menchaca, head of the Senate Health Commission, appealed for “a small extension…to get the law right,” according to Heraldo de Mexico.

It turned out to not be so small. This time the Supreme Court granted a six-month extension; lawmakers will now have until April 30 to legalize, Mexico News Daily reports.

The Mexican Cannabis Institute, a new government agency to oversee the legal market, is now expected to be operational by Jan, 1, 2021. And there is much contention as to what that market will look like.

Ricardo Monreal, leader of the ruling center-left Morena party in the Senate, said upon the extension that the legislative process will proceed with caution “because we want to do things well.” Mario Delgado, Morena leader in the lower-house Chamber of Deputies, is calling for creation of a state-owned company to control sales in a closely regulated market.

But there are more free-market voices, including within the ruling party. Morena’s Sen. Julio Menchaca predicted in October (before the deadline was extended and passage of the law this year became unlikely) that legal cannabis would generate up to 18 billion pesos ($938 million) in tax revenue in 2020.

Will corporate cannabis usurp the campesinos?
With such big money foreseen, foreign capital is of course circling in. Imports from Canada are even broached, which is certainly a very strange irony, given that Mexico has long been a world leader in illicit-market exports, mostly to North American markets.

Vancouver’s Aurora Cannabis, one of Canada’s biggest licensed producers, is especially named as seeking an entry to the Mexican market, according to the investing website TipRanks. Aurora has already gained a foothold in Mexico through its 2018 acquisition of Farmacias Magistrales SA—the only Mexican company that is licensed to import cannabis with more than 1% THC. (Mexico passed a medical marijuana law in 2017, but it is still mostly limited to CBD products.).

However, TipRanks warns that “Mexico is definitely leaning toward giving its own citizens priority in relationship to licensing, to the degree that larger cannabis firms will probably be rejected, or at least put on hold until Mexican producers and distributors are entrenched in the business. That could easily take several years, and maybe longer.”

A draft version of the bill released by the Senate Health Commission on Oct. 18 seems to be a compromise between more populist and more free-market approaches. It imposes a 20% limit on foreign investment in cannabis enterprises. It also seeks to limit vertical integration by barring multiple types of licenses being issued to the same individual, or to family members.

One wonders how effective such measures will be, given the longtime Mexican business practice of prestanombres (name-loaners). And there is opposition from those eager for looser industry atmosphere. Financial news site Aristegui sites Erick Ponce of Mexico’s Instituto del Cannabis (ICAN) opposing such measures as a bottleneck on growth.

Another proposed populist measure stipulates that for the first five years after legalization, at least 20% of cultivation licenses will be reserved for campesinos (small independent farmers) or ejidos (agrarian cooperatives) in municipalities where authorities have eradicated illegal marijuana fields.

Mexico City’s Cultura Colectiva website reported in July that a reporter from the business site Merca 2.0 asked President AndrĂ©s Manuel LĂłpez Obrador at a press conference if the government’s new campesino aid and sustainable forestry program Sembrando Vida would be opened to cannabis producers. The president replied that he would discuss the matter with the program’s directors.

Cartel wars still escalating
As Congress mulls such populist measures, aimed at weaning rural communities long captive to the cartels off of the illicit economy, narco-violence has been hideously escalating across Mexico.

The country’s most powerful drug lord, the notorious Joaquin “El Chapo” Guzmán, was found guilty of trafficking and money laundering by a federal jury in New York in February, and sentenced to life in prison in July. Hedging their bets, prosecutors managed to add 30 years to the life term for use of firearms in commission of a crime, BBC News noted.

But on Oct. 17, when Mexican security forces tried to arrest his son, Ovidio Guzmán LĂłpez, now a top leader of Chapo’s Sinaloa Cartel, it sparked a raging gun battle with extremely heavily armed fighters. A mixed detachment of army troops and the new National Guard force tracked the younger Guzmán down in Culiacán, capital of Sinaloa state. But as soon as he was taken into custody, the troops were surrounded by Cartel gunmen riding in trucks mounted with big machine-guns, and even what appeared to be improvised armored vehicles known in Mexico as “narco-tanks.” Gear-head website The Drive sports photos of this formidable mechanized equipment.

In a bitter humiliation for the government, Ovidio was turned over to his comrades. “The decision was taken to retreat…without Guzmán to try to avoid more violence in the area and preserve the lives of our personnel and recover calm in the city,” Mexico’s security secretary, Alfonso Durazo, said, according to The Guardian.

Two days before that, 14 state police officers were killed in El Aguaje, Michoacán, when their convoy was surrounded by pick-up trucks filled with heavily armed men, BBC News reported. The Jalisco New Generation Cartel was blamed for the attack.

On Sept. 26, an ambush of an army patrol on an opium-poppy eradication mission left three soldiers dead in the village of Balzamar, in Felipe Bravo municipality of southern Guerrero state. Mexico News Daily reports that the “community police,” an anti-narco vigilante force that has emerged in Guerrero, is preparing to “go to war” against the Cartel del Sur, which is believed to have been behind the attack.

And in mid-September, yet another of the “narco-fosas”—mass graves where the cartel enforcers dump the bodies of their victims—was uncovered in a well outside Guadalajara. Authorities investigated when residents complained about the smell. At least 44 bodies were found, cut up into pieces and hidden in 119 black bags, according to BBC News.

It made more stateside headlines when three women and six children belonging to a family of US citizens from a rogue Mormon sect with communities in northern Mexico were slain when their vehicles were ambushed on a road near the border of Sonora and Chihuahua states. Security Secretary Durazo said they might have been mistaken by cartel enforcers for members of a rival gang. A local affiliate of the Sinaloa Cartel known as Los Salazar is fighting for control of the area with La Línea, a gang linked to the Juárez Cartel, according to Mexico News Daily. Multiple suspects in the attack have been arrested, AFP reports, although little other infromation was made available.

And the militarization of cannabis enforcement continues. On Nov. 14, a mixed force of army troops and Guerrero state police confiscated an unspecified large quantity of marijuana along with weapons in a traffic stop in Coyuquilla village, Petatlán municipality, Sol de Acapulcoreports. An army patrol seized a ton of cannabis in Ensenada, Baja California, as it was being put on a small boat for export across the border, Noticias Ya reported Oct. 23. In July, an army detachment “decommissioned” (burned) a ton of cannabis in Ixtlán del RĂ­o, Nayarit state, according to Acustik Noticias.

Cannabis legalization has been posed as a solution to the narco crisis in Mexico. But utopian expectations that it will make the cartels simply evaporate may be setting up the entire effort for recrimination from prohibition-nostalgists when that fails to happen. And if legalization is not effectively crafted to benefit the campesino communities now captive to the cartels, such a failure is all the more likely.

Cross-post to Global Ganja Report and Cannabis Now

Photo via The Drive